Editorial: Tax reform a difficult balancing act

The property tax as a means of funding public schools in Pennsylvania needs to change.

The system creates an educational disparity by funding public schools based on the value of real estate, hence the phrase, "education by ZIP code."

And the tax burden, particularly in older towns and rural areas, makes it difficult for those on fixed incomes to stay in their homes and for young people to buy homes.

The property tax discourages small businesses from relocating into areas where the tax burden is high, continuing the cycle of homeowners bearing the brunt of school funding.

In the face of these issues, many want to eliminate the property tax, landing one knockout punch that helps senior citizens, schools and struggling communities in one fell swoop. As editorial writers for the Pennsylvania Digital First Media editorial board, we would like that, too. But it's not that simple.

Pennsylvania's system of 500 separate school districts and its long affection for locally based decisions has created a monster whose appetite will be hard to fill with a new funding mechanism.

The Property Tax Independence Act, or Senate Bill 76, proposed by state Sen. David Argall, R-Schuylkill, is the closest Pennsylvania has come to a tax reform bill that has support in the Legislature. But that support to date has not been enough to see the bill reach the governor's desk. The bill has a fair number of detractors, including a coalition representing small businesses that would see their services taxed under an expansion of the sales tax.

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The bill has also been challenged by the Independent Fiscal Office as falling short of revenue needed to fund public schools. Argall addressed shortfalls in 2012 by tweaking the bill into its current form, but the IFO says it still falls short of needed revenues.

Business groups have been lobbying SB 76 sponsors for revisions that would address their concerns, but no amendments or changes have been forthcoming. Without compromise on some of these concerns, SB 76 faces the same fate as many of its predecessors — death by inaction.

House Bill 1189 proposed by state Rep. Seth Grove, R-Dover Township, has actually gained enough traction to pass the House and now sits in the Senate Finance Committee. The bill would put the burden of keeping or eliminating the property tax back on the school districts. It changes the method of taxation but does not really address the disparities at the heart of the funding problem.

And, Senate Bill 299 sponsored by Sen. Dominic Pileggi, R-Chester, would freeze property taxes for senior citizens but does nothing to shift the responsibility for public education or solve the underlying failures of this system. The bill also does not yet have a funding mechanism — although taxing Marcellus Shale extraction has been suggested.

None of the current property tax proposals tie funding reform to public education expenses reform.

The problems, and the solutions needed, are bigger than the elimination of this onerous tax. Yes, we want to see it eliminated for all the reasons stated above. But we want it done right, with attention to efficiency in how schools are run and with reforms in public pensions that reduce the local burden of covering a $40 billion liability created in large part by bad decisions on the state level.

Fixing the school funding problem begins with property tax reform, but it doesn't end there. And while SB 76 holds some promise as a property tax reform measure, it needs some work in order to gain widespread support and achieve the goal of removing disparities from public education without causing undue harm to the economy.

The momentum for tax reform gets stalled each year as it nears the finish line. Changing that outcome requires bringing stakeholders to the table for a measure that solves these inequities once and for all.

- Digital First Media Pennsylvania Editorial Board. YDR editors are members of this board.

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